Salar posted on September 07, 2008 23:52
The mortgage giants Freddie Mac and Fannie Mae are set to be put under government control in an attempt to rescue the firms, media reports say.
THE US TREASURY will today announce a rescue of Fannie Mae and Freddie Mac, two giant American mortgage banks, in what is likely to be the biggest financial bail-out of recent history.
The move may trigger a bounce in global stock markets next week However, analysts warn that some of the uncertainties that plagued the markets last week, including worries over the duration of the credit crunch, will persist.
Although the boards of both Fannie Mae and Freddie Mac have been attempting to resist moves by the Treasury that would wipe out shareholders. However, Henry Paulson, the US Treasury secretary, is believed to have told the chief executives of the two government-sponsored enterprises - Fannie Mae’s Daniel Mudd and Freddie Mac’s Richard Syron - that they will lose their jobs when the two firms, which control about 75% of the US mortgage market, are put into “conservatorship” today.
The move to shore up the shareholder-owned firms, which hold or guarantee half the US mortgage debt, would be the US's largest ever financial bail-out.
What this could mean for UK Mortgage Crunch remains to be seen. It is just too early to project what will happen in the long run. In the short run there will be some share rallies for battered share market.